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Basic Question 12 of 12
Use the Black-Scholes-Merton model adjusted for cash flows on the underlying to calculate the price of a call option.
Exercise price: $100
Continuously compounded risk-free rate: 5.25%
Time to expiration: 2 years
Volatility: 0.3
Continuously compounded dividend yield: 2%
Underlying price: $125
Exercise price: $100
Continuously compounded risk-free rate: 5.25%
Time to expiration: 2 years
Volatility: 0.3
Continuously compounded dividend yield: 2%
User Contributed Comments 4
| User | Comment |
|---|---|
| ssradja | how should i know n(d1) or d2. i thought they should give the table so we can find the right number. anybody? |
| Smiley225 | I cant see us being required to plug a bunch of figures BSM model in the exam.... |
| mcspaddj | What, we can't bring our laptops? |
| jperez049 | Should the carrying benefit of 2% compound dividend yield also be considered when calculating d1? I can see the adjusted price of the underlying but not in the calculation of d1... |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
identify assumptions of the Black-Scholes-Merton option valuation model;
interpret the components of the Black-Scholes-Merton model as applied to call options in terms of a leveraged position in the underlying;
describe how the Black-Scholes-Merton model is used to value European options on equities and currencies;
CFA® 2025 Level II Curriculum, Volume 5, Module 32.